Steven Tadelis, University of California Berkeley Haas School of Business

Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment

September 18, 2013 | 11:45am - 1:00pm | Cumnock 101B | Open to public

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​"Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment" 

Steven Tadelis with Tom Blake and Chris Nosko

 

ABSTRACT

Internet advertising has been the fastest growing advertising channel in recent years with paid advertisements on search platforms (e.g., Google and Bing) comprising the bulk of this revenue. We present results from a series of large-scale field experiments done at eBay that are designed to detect the causal effectiveness of paid search advertisements. Results show that brand-keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates. We find that new and infrequent users are positively influenced by ads but that existing loyal users whose purchasing behavior is not influenced by paid search account for most of the advertising expenses, resulting in average returns that are negative. We discuss substitution to other channels and implications for advertising decisions in large firms​.